I’ve been diving into the debate between stock market and real estate returns, and what struck me was the insightful discussion that unfolded. One investor shared their personal story of investing in both Bay Area tech stocks and real estate, and it was fascinating to see their 2016 returns laid out.
Returns Comparison
The numbers this investor reported were telling:
- S&P500: 9.5% gain
- NASDAQ: 7.5% gain
- Their Stocks: 7.3% gain
- Their Real Estate: 7.9% gain
- Their Net Worth: 16.1% gain
What caught my attention was that both stock market and real estate investments were neck and neck in terms of returns. However, it was the use of leverage that made all the difference in net worth growth – a crucial takeaway for me.
The Role of Leverage
One participant drove home the point that leverage can be a game-changer in real estate investing. They suggested that with a 1:3 or 1:4 leverage ratio, net worth growth can jump to over 20% or 32%, respectively. But what really stood out was another investor’s clarification that their ‘infinite leverage ratio’ was actually a result of using borrowed money to fund all their purchases, with the percentage gain calculated based on the overall appreciation of the properties’ value.
Dividend Investing
The conversation also veered into dividend investing, with some investors singing the praises of Apple’s dividend growth, which has been climbing by 10-15% per year. One investor pointed out that even with a relatively modest yield of 1.77%, the dividend growth can still generate a significant income stream over time.
Key Insights
So, what can we take away from this discussion? A few key insights stood out to me:
- Leverage can be a major factor in real estate investment returns.
- Dividend growth can be a valuable piece of a long-term investment strategy.
- It’s crucial to consider multiple perspectives when evaluating investment opportunities.
All in all, the comparison between stock market and real estate returns drove home the importance of considering a range of factors – leverage, dividend growth, and overall investment strategy, to name a few.